A recession is a period of an economic slowdown that usually lasts for two quarters. It can result from a decline in business and consumer spending, as well as layoffs and other reductions in industrial production.
The downturn has already begun according to some economic indicators which are pointing towards continued weak economic growth through the year 2023.
Some researchers have suggested that the Ukrainian War may be playing a role in exacerbating economic downturns around the world.
Since 2014, global trade has declined for four consecutive years which has led businesses and consumers to cut back on purchasing goods and services. In turn, industries that rely heavily on exports (such as manufacturing) are typically hardest hit during recessions.
When times are tough, marketers often take a step back and evaluate their strategies. This can be difficult when downturns coincide with seasonal changes like holidays or summer vacations; however, market research is essential for success in any economy.
Understanding Recession Psychology
It’s important to remember that downturn psychology affects your customers and marketing efforts just as much as it does yours.
For example, if you’re a small business trying to stay afloat during a recession, you may see increased customer complaints (either because people are struggling financially or they don’t understand the new policies your company is implementing).
In cases like this, do your best to address any concerns before they turn into negative reviews.
The tendency of delaying the big-ticket purchase of durable & FMCG goods.
When recession looms on the horizon, we tend to delay our big-ticket purchase of durable goods and FMCG goods.
The delay in the purchases of big-ticket items is driven by both the expectations as well as the actual experience of the consumers. During the recession period, the expectation of life-cycle products (e.g. television sets) gets pushed forward.
In addition, the actual experience of the consumers of buying durables during the recession period has a significant impact on the future behaviour of the consumers.
The actual experience of buying durable during a recession seems to be like a punishment and the consumers tend to delay the purchase of durables in later periods of the recession.
What are the biggest challenges faced by SMEs in a downturn & recession?
When an economy is in a downturn or recession, small to medium-sized enterprises have to face even more challenges than before.
Not only that but also the survival rate for small businesses decreases every year. These challenges may include:
- How to survive the downturn
- How to attract and retain customers
- How to keep staff motivated
- How to maintain cash flow How to make the most of opportunities
- How to manage a small business
- How to get funding How to be competitive
What kind of marketing activities are stopped during a downturn & recession?
There are many challenges faced by SMEs in a downturn and recession.
- First, in a recession companies’ budgets for marketing and advertising are drastically reduced.
- Second, companies are less willing to pay for new advertising methods such as social media.
- Third, companies may cancel marketing contracts, for example for SEO and SEM, which would lead to a lack of traffic to the website.
- Fourth, sales are more difficult to be generated despite the marketing efforts.
- Fifth, marketing expenses are cut.
Why you should not cut your marketing budget in a recession?
Even during tough economic times, it is important for marketers to keep their budgets in check. Marketing is the key to success in a recession. Everyone is struggling and we have to find new ways to fight our competitors.
Many people in business have the misguided notion that a recession is a great time to cut back on marketing and advertising. In reality, a recession is a terrible time to do so.
In a recession, people will be even more protective of their budgets. Most people in business will cut back on their marketing budget. You need to make sure that your marketing is still effective.
Cutting back on marketing and advertising will hurt your business and you could lose money. Your competitors will still be running effective marketing campaigns and you may lose more money in the long run. It’s better to be safe than sorry and keep your marketing budget intact!
However, marketers should be careful not to overspend in order to grab market share- this could backfire and actually lead customers towards competitors instead.
It’s essential to assess each situation carefully before making any marketing decisions
How Market Research can be a saviour during a recession?
The current global recession has sent many investors scrambling for answers. Seeking remedies in the form of market research has become a necessity for today’s businesses.
This recession is unique in the sense that it is being driven by an unprecedented failure in consumer spending power, as opposed to the typical business cycle downturns attributed to inflation, recession and monetary policy.
Major reasons why consumer spending has been low are unemployment, distressed housing, high gas prices and slowing consumer credit availability.
Corporate America, however, has not reacted as quickly as it is accustomed to these recessionary conditions, causing some to worry whether this current crisis will continue to worsen.
How can companies use market research in a downturn?
At a time when businesses are trying to cut down on every expense possible, it’s important to do market research.
Without it, sales are more likely to drop as well as profits. With market research, you’ll learn more about your customers and how to improve your sales even during a downturn.
One way to do market research is to survey your customers online through a one-time survey. You’ll learn more about your customer base and be provided with the information you need to improve your sales and help the economy!
As the recession continues and business continues to decline, it is important for you to try to track the performance of your peers.
You will find that many businesses have fallen off the map or have become stagnant. You need to do your research as to why this has happened and adapt your marketing strategies to be able to capture lost customers.
What are the opportunities that a business can explore during a looming recession?
There are a number of opportunities that businesses may explore during recessions.
Some marketers might focus on tapping into underserved markets- such as gift items or budget-friendly services.
Others might take advantage to target new customers i.e. areas never explored before. Still, others might feel the need to offer lower prices in order to compete with rivals that have lowered their prices even more during tough economic times
Finding the upside of an economic downturn
Recession never hits every market and category the same way. Few markets may suffer but other markets may thrive during the recession or downturn.
The recession can be the time to test new products, services, and markets to see what sticks.
By using this time to look at what’s new and what’s working, you can find new ways to get ahead of your competition and make your company an industry leader.
Have a look at TrendHunter.com or SocialTimes.com to see what’s trending right now and try to incorporate it into your business.
There are always times when an economic downturn offers marketers the opportunity to tap into under-served markets.
During an economic slowdown, some small businesses that have been struggling might see renewed interest if they offer unique services or products not currently available on the market. It’s important to stay focused and assess any potential opportunities before jumping into anything
It’s important to have a plan in place that will allow you to:
- Revisit your target market
- Determine what your customers actually want/need
- Develop products and services that meet those wants/needs
Conclusion
No matter what is going on in the economy, it’s still important to stay on top of your game.
Market research is one of the best ways to stay in the know. By conducting market research on a regular basis, you are able to maintain the information you need to stay ahead of your competitors and create new opportunities for your business.
In the current economic climate, you may be tempted to cut corners and spend less money on these important research endeavours.
However, it’s important to remember that a good investment in marketing and market research now can help your business stay ahead of the game and create a valuable place in the market.
At Research Network, we provide participants for Market Research studies.
Research Network can help you find participants for your big market research covering 11 Asia-Pacific countries. If you have any further questions on how to make the most of business in Asia-Pacific, we are always available to answer your queries.
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